Diary of a Financier

Top Newsstuffs (November 25-December 1)

In Bookshelf on Sun 1 Dec 2013 at 05:03

Gobble gobble…

My favorite chart on earth: Government spending funds every secular bull market | Stock Trader’s Almanac
Whether WWI, WWII, Vietnam, or the War on Terror (2001-present), stocks enter a secular bear market & consolidate for a decade-plus during waged wars, while inflation (CPI) increases.  Thereafter, stocks break out in a >500% multi-decade rally with stable CPI.
“Major wars are funded with massive government spending and this money always finds its way into the economy eventually, causing prices and wages to rise along with secular bull markets for stocks.”
#Bullish $DJIA

NYSE margin debt & balances: Another new high (October 2013) | Doug Short (dshort.com)
Gross nominal margin debt +2.8% to another alltime high ($412.5B).
Real debt spiked higher again, now far above 2000′s high & only 3.5% below 7/2007′s record.
Net margin balances (-$117.7B debit) reach another ytd low, remaining far below 2007 & 2011 pre-correction lows and drawing ever closer to Tech Bubble’s record low (-$123B).
#Bullish ST #Bearish LT #Euphoria

Photos: Top street art of 2012 | Memolition
Graffiti artists’ 48 best works.

The long tail of the housing crisis: Legacy home equity lines of credit pose a new wave of threats | Reuters
40% ($221B) of all outstanding HELOCs, 2004-06 vintages are hitting their 10-year anniversary, when principal balances are traditionally amortized.  New P&I monthly payments will triple for some, so watch 90-day delinquencies & defaults.
[Previously: Fed’s household credit report]
#Bearish #Black swan

The status of the solar power industry | Quartz
The solar project pipeline includes a massive photovoltaic (PV) project backlog, which is +7% y/y to 2,400 projects or 43k MW–enough to light 6mm homes & make US the 3rd largest solar market in the world (behind China & Japan).
While some projects will get cancelled, there’s a rush to break-ground before 2016, when a tax credit falls from 30 to 10%.  The building boom’s demand may make solar more cost competative (i.e. price parity) with fossil fuels.
[In 2012, wind installations spiked as a similar tax credit expired.]
$TAN $FSLR $SCTY #Renewable energy

Apostolic exhortation: “Evangelii Gaudium” (“The Joy of the Gospel”) | Pope Francis (Roman Catholic Church)
The religious leader attacked the global economic system,  critiquing trickledown economics for exacerbating weath gaps & calling unfettered capitalism “a new tyranny”:
“How can it be that it is not a news item when an elderly homeless person dies of exposure, but it is news when the stock market loses 2 points?”
He put the onus on the rich, but asked politicians to guarantee all citizens “dignified work, education and healthcare,” saying thou shall not enable an economy of exclusion, inequality, poverty & the “idolatry of money.”
He also encouraged cooperation among religions, mentioning Jewish & Muslim faiths.

Most common questions potential investors ask entrepreneurs | Business Insider
When entrepreneurs solicit Venture Capitalists (VCs) & Angel Investors (Angels) on ABC’s Shark Tank, they should address the following in their pitch–or at least be able to answer when asked:
1. Sell yourself- highlight your record of success & industry experience; what do you bring to the table that warrants an investor’s gamble?
2. Why do you need money- know exactly what you could do with the capital & how it could help the company grow/scale rapidly
3. Valuation- justify your multiple analysis in detail
4. Is your product unique- is the market crowded; who is competition; do you have/need patents?
5. Sales/revenues- numbers, segment breakdowns & forecasts
6. Costs
7. Debt- know your capital structure & terms (covenants, etc.)
8. Inventory- lean, well-managed inventories are essential

The phenomenon of FY earnings consensus downward revisions: The triumph of hope over experience | Gerald Minack (formerly of Morgan Stanley)
As the MS strategist was leaving the firm, he admitted:
“[Analysts] are almost always wrong – almost always because [their estimates] are too high.”
Charts the average historical 12mo forward consensus $SPX EPS growth forecasts (1976-2012), which almost always far exceed actual, reported earnings.




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